The real estate market in Spain reached a total return of 2.2% in 2020, according to the MSCI Spain Annual Property Index. This parameter grew by 15% in 2020. In this sense, the total value of the assets in the index went from 19,200 million euros to 22,000 million at the end of 2020. The increase is mainly due to the inclusion of new portfolios and new participants in the index.
The total return of 2.2% is one of the lowest ever recorded over the 20-year historical series, however, it is considered positive and clearly above the worst results that have been achieved just after from the beginning of the global financial crisis in 2008.
The lower performance compared to the total return of 8.6% achieved in 2019 was largely due to the devaluation of assets (the capital return went from 4.2% in 2019 to -1.8% in 2020), but also to a slight reduction in the income return, which went from 4.2% to 4.1%.
Compared with other asset classes, real estate achieved in 2020 a total return of more than -12.4% of equities, which has had a very difficult year, but less than 4.5% of fixed income.
Despite the lower performance in the last year, real estate is positioned as a very good long-term option. «Looking at the last 20 years, real estate reached a total annualized return of 7.1%, which exceeds 3.1% of equities and 6.1% of fixed income», says Luis Francisco, vice president of MSCI.
Residential was the best performing sector in 2020, with a total return of 8.3%, followed closely by the industrial with 8.1%. Residential was also the only sector that improved its total performance in the last year.
The office sector achieved a total return of 1.1%, combining an income return of 3.8% and capital growth of -2.7%. After six years, a devaluation of assets is registered.
Retail and hotels have clearly been the most penalized in 2020, with returns of -0.6% and -6%, respectively, as a consequence of the devaluation of assets. In both sectors, there was also a reduction in the income return, which went from 5.4% to 4.5% in the retail sector and from 4.9% to 3.6% in the hotel market.
Regarding vacancy, «with the exception of the Industrial/ Logistics sector, there was an increase in vacancy in all the others and that will be an element to be taken into account for the year 2021», adds Luis Francisco.